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Our Thought Provoking Insights

Beyond Cost: The Strategic Value of Digital Transformation in Retail

Digital transformation has shifted from "nice to have" to being imperative in the retail sector. Without it, you will become progressively disadvantaged. It should not be seen as a cost, but rather as an essential investment. The arguments in favor of it are compelling. The potential for technology to provide vastly greater speed and accuracy in decision-making is critical. Moreover, it dovetails with two fundamental structural drivers across the entire industry.

The first concerns complexity. Most retailers today are selling through a variety of channels, from stores, concessions, and wholesale, to websites, platforms and increasingly, social media. Each has different demand patterns, pricing dynamics, stock allocation and replenishment requirements. A one-size-fits-all approach simply won’t work.

The second is related to trading economics. The industry is significantly oversupplied, with far too many stores and websites chasing insufficient demand to feed it. This is helping to exert increasing downward pressure on margins. Retail is becoming a less profitable business.

The market has never been so competitive and the pressure on leadership teams to remain on top of the plethora of decisions needed is growing. Mistakes are costly. The ability to model multiple scenarios for planning, pricing and demand forecasting vastly exceeds anything humans can do. Speed and accuracy are essential, especially given the accelerating rate of change. Tech enables this, and AI gives leaders the means to match the growing dynamism of the retail marketplace.

Some believe tech is there to replace people – that it’s a means of cost-cutting. However, in our experience across most sectors and businesses large and small, this is simply not true. Technology transforms the ability of the leadership team and its support teams. It takes away the burden of manual number crunching and frees those teams to focus on how to leverage the resulting intelligence, in turn feeding senior leadership with optimized data and insight to make the right decisions faster.

Change is often seen as something of a threat – it’s a common human characteristic. But digital transformation should be viewed as a huge opportunity. A market that is experiencing unprecedented change cannot be served by businesses that rely on outdated operating models. Leveraging the vast amount of customer data generated by retailers is essential for better serving customers and mitigating profit pressure, transforming trading economics.




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